Working Paper

Does the Winner Take It All? Redistributive Policies and Political Extremism

Gianmarco Daniele, Amedeo Piolatto, Willem Sas
CESifo, Munich, 2020

CESifo Working Paper No. 8214

We show that regional heterogeneity of underlying fundamentals (e.g. economic history, geography, social capital) can lead to extreme voting in federations. When the outcome of federal policies – such as transfer schemes, market regulation or migration laws – depends on these fundamentals, the set of regions that wins or loses from a given policy is fixed. This gives voters a strategic incentive to distort the policy magnitude, by electing federal representatives that are extremely protective of regional interests. Interestingly, the benefits of selecting tough negotiators outweigh those of belonging to the ruling coalition. We test our predictions by looking at parties’ performances at national and European Parliament elections from 1990 onwards, and find that strategic voting is indeed U-shaped: winning and losing member states vote more extremely than those in the middle. Our online survey provides further evidence.

CESifo Category
Public Finance
Public Choice
Keywords: political extremism, interregional redistribution, federalism, strategic delegation, bargaining, coalitions, EU elections, Euroscepticism, populism
JEL Classification: D720, H600, H710, H770